MF Global's CEO bet the firm on European sovereign debt — and customer funds went missing

MF Global, a brokerage firm led by former Goldman Sachs CEO and New Jersey governor Jon Corzine, made a massive proprietary bet on European sovereign debt in 2011. Corzine used the firm's own capital to buy over $6.3 billion in European government bonds, betting that the eurozone crisis would not lead to defaults.

When European bond prices fell and margin calls mounted, MF Global could not meet its obligations. The firm filed for bankruptcy on October 31, 2011. In the chaos of the collapse, approximately $1.6 billion in customer segregated funds went missing — a violation of the fundamental rule that customer funds must be kept separate from the firm's own money.

The missing customer funds were the most damaging aspect of the collapse. Corzine was banned from the securities industry, and MF Global's customers faced years of litigation to recover their money. The case illustrated how a CEO's personal conviction can override risk management, and how the commingling of customer and firm funds — even temporarily — destroys the trust that is the foundation of a brokerage.